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Cover Story: Landing EADS
Area ideal for second aircraft plant
By MATTHEW FRENCH
Staff Writer
Just months after landing the Vought-Alenia aircraft plant in North Charleston, the Lowcountry has another opportunity to secure a second aircraft manufacturing plant that could generate roughly 1,150 jobs over a six-year period.
The European Aeronautic Defense and Space Co., the world’s second largest aerospace and defense company, announced in January that its North American division will select a site for a “military modification and assembly line” for the production of refueling aircraft somewhere in the United States. EADS is the parent corporation of the aircraft giant Airbus Industrie, and it also manufactures tanker and refueling aircraft used extensively by the armed forces of Australia, the United Kingdom, Canada and Germany.
The company plans to submit a bid to build its KC-330 tanker for the U.S. Air Force. The average age of an Air Force tanker is about 44 years, according to Air Force documents. EADS North America, based in northern Virginia, will partner with an American company to offer its plane to the Air Force, which tends to look more favorably on domestic manufacturers.
“We are preparing to be competitive for the U.S. tanker program,” says Guy Hicks, vice president of communications for EADS North America. “We plan to do this with a U.S. partner, and the site selection process is an adjunct to that.”
EADS issued requests for information to any interested state early this year, and the company expects responses from about two-thirds.
“Right now we anticipate that between 35 and 37 states will have between one and three candidate cities return RFIs, which could lead to a very large pool of candidates,” Hicks says. “We then expect over the next several weeks to whittle those down to a few select cities that meet the upper end of our requirements. We will then issue (requests for proposals) to those cities, and the RFP deadline will be sometime between the end of the second quarter and the beginning of the third quarter of this calendar year, and then continue in the selection process. We expect our search will be complete by the end of this year.”
Getting in the game
Local and state representatives refuse to comment on whether the state in general, or the Charleston area in particular, will attempt to land the EADS plant.
South Carolina Department of Commerce spokeswoman Amy Murray says the department “does not discuss any deals they may or may not be working.” Similarly, Karen Kuchenbecker, spokesman for the Charleston Regional Development Alliance, will not comment on any local participation in the site competition.
“I don’t know if this particular company is looking at Charleston,” she says. “Even if they were, we’re not at liberty to discuss what, if any, potential deals we’re working on.”
However, EADS did confirm that representatives from South Carolina were in attendance at a special informational event in the middle of February, which was set up for states interested in competing for the manufacturing site.
Charleston area a good fit
The Charleston area could be well-suited for the EADS manufacturing plant, given the company’s criteria. Requirements for the location include an airport with a minimum 9,000-foot-long runway; a tract of land to accommodate a total of 1.5 million square feet of production, hangar and office space; a transportation infrastructure with good access to rail and road; and a means of large volume transport to a deep-water seaport.
Charleston’s International Airport has two runways 9,001 feet long and 200 feet wide, which meets EADS’ minimum requirement. The two runways are capable of handling airplanes that weigh up to 775,000 lbs. The airport’s other two runways fall short, at about 7,000 feet, with 1,000 feet of overrun space.
The transportation infrastructure in the Lowcountry would also meet the requirements, given fast access to I-26 and I-95, as well as two railroads in Charleston County and another east of the Cooper River. Two switching railroads are located in Charleston County. The Port Utilities Commission of Charleston and the Port Terminal Railroad provide switching services to the terminals of the South Carolina State Ports Authority, and CSX Transportation and Norfolk Southern. The East Cooper and Berkeley Railroad, a short line railroad, located in southern Berkeley County serves British Petroleum and Nucor Steel, according to the state’s division of public railways.
And Charleston obviously has the port, which is already the fourth-largest container port in the country, located on deep water, and is going to expand its presence in the area when the terminal at the former Charleston Navy base becomes operational.
Available land
The one area that could potentially hurt Charleston is the land needed to house 1.5 million square feet of office, manufacturing and warehouse space. The land requirements for that much building space could be hard to meet, says Michael McFall, a commercial broker for Maybank Properties LLC.
McFall says the amount of land EADS would require, which includes building space, parking lot space, access roads and any extra infrastructure, including water, sewer or electricity, would be sizable, but sites that large do exist in the area.
“I’ve found a few sites in the several hundred acre range, including some land near the airport,” McFall says. “For 1.5 million square feet of building space, they wouldn’t need much more. What we’re looking at now is how much spin-off of a company like Vought coming in is going to create for available buildings.”
Al Parish, director of the Center for Economic Forecasting at Charleston Southern University, says he doesn’t think space should be much of a problem, provided the land is solid and not located in the wetlands that surround the airport.
“There’s a lot of land out there by the airport, the question is whether you’d sink up to your hips if you tried building on it,” he says. “But this is exactly the kind of thing that we want to see: similar companies looking at this area.”
Vought’s impact
Parish says that companies of similar types working in close geographic proximity to each other tend to produce efficiencies that might not otherwise be found.
“I do think that a company like EADS that could look at this area would look closely at Vought and say that there has to be a reason (Vought) came here,” he says.
Parish admits that the big drawback to the Charleston area, and South Carolina as a whole, is education.
“I think that’s the one thing that keeps a lot of companies from looking at us,” he says. “It’s not about taxes, but indirectly about the workforce and available labor. If it weren’t for Trident Technical College teaching some of these specialized skills, we’d be in real trouble.”
Intangible factors
When Charleston landed the Vought-Alenia deal, speculation about what was given in return was rampant. A piece of legislation quietly passed early last year could benefit EADS the same way it benefitted Vought.
At the urging of the state’s Commerce Department, the Legislature passed an incentive bill that provides up to $50 million in bond funding for businesses that invest in a major air cargo facility. The bond was buried in the Textile Communities Revitalization Act, and contains many caveats to which the company must first adhere, such as committing the air carrier to use the air carrier hub terminal facility for five years.
Add to the potential bond money South Carolina’s lack of unions, and the Palmetto State could be considerably more appealing than the traditional manufacturing powerhouse states in the Rust Belt, where organized labor is prevalent and cost of living is higher.
Another potential bump in the road is the fact that the company doesn’t have a contract with the Air Force yet.
The company is offering this tanker aircraft to the Air Force “for the modernization of the U.S. Air Force’s aerial refueling fleet,” but have not yet received a contract for the aircraft. The company’s press release speculates that a “large order” by the Air Force could lead to further expansion of production facilities, but there is no guarantee EADS will win.
American aircraft giant Boeing has supplied the Air Force with its tanker fleet for decades. But the company ran into some difficulty last year when a proposal to lease 100 new tankers to the Air Force fell through after Congress balked at the cost and prompted allegations of back-room negotiations and concern over the age and ability of the tankers.
Doug Karas, a spokesman for the Air Force, says the service is looking to recapitalize its tanker fleet over the next several years, but is waiting for what is called an analysis of alternatives. An AOA is an analytical comparison of the operational effectiveness, suitability and life-cycle cost of alternatives that satisfy established capability needs, according to Defense Acquisition University regulations. An AOA is required for major defense acquisition programs, which are defined as costing more than $355 million in research, development, testing and evaluation, or about $2.1 billion in procurement.
“We are in a holding pattern right now because we’re awaiting the result of the AOA,” Karas says. “We are awaiting a decision from the Office of the Secretary of Defense level to move forward. It may not be until August that we get the results of the AOA, so in the meantime, we’ve been authorized to set up the mechanism by which we will do the competition when we get the word to do so.”
Matthew French covers manufacturing for the Business Journal. E-mail him at mfrench@crbj.com.
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